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The Business Perspectives webinar on Strategy Matters in Turbulent Times: Think Big Data. Think Business Models took place on Thursday 13 October. If you missed the webinar or want to watch it again, it is now available to view on demand.

The one-hour webinar focussed on business models, strategic growth, digital strategy and big data. The webinar also included video highlights from our masterclass in London on 21 September.

Our webinar panellists included Professor Thomas Lawton, Professor of Strategy and International Management at The Open University Business School (OUBS), Jerry Teahan, Head of Strategic Business Development (Network, Cloud Services) at BT Group and Dr Hilary Collins, Lecturer in Management at OUBS. The webinar was facilitated by Peter Wainwright, MBA alumnus and Consultant at Askyra Ltd.

You can also share your views and comments about the event or topic by following us on Twitter @OUBSchool, using #OU_BP

The complimentary webinar from The Open University Business School (OUBS), will look at business models, strategic growth, digital strategy and big data. The online webinar will take place on Thursday 13 October 2016 at 18:00 – 19:00 (BST).

What are the critical components to design and deliver an innovative, effective business model?

How do you render a growth-oriented business model robust enough to deal with today’s unpredictable world?

How can you factor in global disruptions driven by digitalisation, big data and geopolitical risk?

The webinar will include video highlights from our masterclass in London on 21 September. We’ll draw on the contributions from our masterclass and further develop these discussion points during the webinar, and we invite you to contribute via our live online polls and Q&A forums.

Webinar panellists include Professor Thomas Lawton, Professor of Strategy and International Management at OUBS. The webinar will be facilitated by Peter Wainwright, MBA alumnus and consultant at Askyra Ltd.

Guest blogger: Thomas C. Lawton, PhD FRSA, Professor of Strategy and International Management at The Open University Business School.

The purpose of our Business Perspectives event in London on 21st September is to integrate research, consulting and practice in a discussion about the interface of data, digital and business models. Questions raised will include: what is a business model and how can managers innovate existing business models to create new market opportunities? How have digital technologies transformed business models? How can big data drive a growth-oriented business model? We are fortunate to have three excellent business speakers, representing insights and experiences from large corporations (BT Group), mid-sized companies (Hillgate Travel), and consultancy (Added Value/Kantar). I will add my thoughts, based on 20 years of research, writing and advisory work.

Whilst the tone of the day will be critical but upbeat and positive, it is worth reflecting in advance on the challenges and in some ways, existential threats that exist to disruptive and often asset-light business models. Let’s take two examples: Airbnb and Uber. Investors have valued Airbnb at $30 billion and Uber at close to $70 billion. But as I write, I am in Germany’s capital, Berlin, a city that has regulated to prevent entire homes being rented through Airbnb and that banned Uber, ostensibly on consumer safety grounds. As we know, lobbying by black cab drivers meant that London came close to restricting Uber’s business model when Boris Johnson was mayor. Sadiq Khan may yet impose Berlin-style restriction on Airbnb, as research indicates up to half of Airbnb rentals in London are offered by professional landlords, limiting further the number of long term rental properties available in a city with an already chronic shortage of housing.

My point is that it is easy to be carried away by the hype and hubris surrounding new, digital, data-driven business models. What the market and some consumers value may not be valued by all and if a company does not factor in wider stakeholder engagement, it risks unravelling the very fabric of its business model. In my research, I call this an imbalance or misalignment between a company’s market and non-market strategy. The non-market refers to the political, regulatory, social and environmental contexts in which a company operates. Airbnb rushed to grow its global footprint and sign up more and more hosts without considering the impact its nightly rental business model would have on neighbours and communities. Uber focused, understandably, on customer satisfaction but neglected to make a case to political and regulatory authorities about the positive impact its business model would have on urban congestion and pollution through, for example, its ride sharing option.

For companies to maintain growth, an aligned strategy, reflecting both market and non-market engagement, is critical to the integrity and success of business models and must occur at all levels, from city to state.

We can continue this conversation during and after Wednesday’s event. I look forward to meeting you there.

If you would like to attend our masterclass ‘Strategy Matters in Turbulent Times: Think Big Data. Think Business Models’, please visit The Open University Business School website for further information and details on how to book.

We are pleased to publish the second Business Perspectives summary report, which concludes the strategy quarter with cutting-edge perspectives from around the globe.

We invite you to download and share the report and send us any comments. A similar summary report will be available following the leadership quarter. If you would like to contribute your perspective towards the leadership theme, please contact our Business Perspectives Editor using the web-form in the Leadership Masterclass post.

Tamim Elbasha, Research student in the Centre for Strategy and Marketing at The Open University Business School. Tamim was originally trained as an optician, with over 10 years of experience in the optical-retail industry gained in the Middle East and the UK.

After a few decades of researching strategy, we still know very little about how first-line managers understand and cope with strategic directions.

Who are these managers you are talking about?

First-line managers (FLMs) are managers who practice mainly business-related skills rather than doing a functional job. They do budgeting, reporting, recruiting, implementing policies etc. Their position denotes usually the first step in the management ladder.

If they are at the bottom of the managerial pyramid, why should we be interested in how they understand strategy?

Well, many Western economies have shifted swiftly from being product-based to service and knowledge-based. This shift has brought with it a flatter organisational structure, which means that organisations in many industries have huge number of FLMs and few middle managers. High street retailers and restaurant chains are good examples, where branch managers are the FLMs.

The branch manager is typically responsible for delivering services and products to customers. They are the only ‘managers’ known to customers and, sometimes, even to employees. Think about the last time you had trouble returning or exchanging something, who did you ask to speak to? Who did the employee speak to, their branch manager or their regional manager?

Aren’t these managers paid to do what the boss is asking them to do?

Sure. But what they consider to be a strategic direction has a great impact on what they do inside their stores. They decide on how and what to communicate to their staff, the in-store work atmosphere, and how customers are actually treated in their stores.

I see where you are coming from, but this has nothing to do with strategy.

Not quite. All these ambitious strategies are drawn up at the head office and usually announced in big events. However, implementing these strategies is usually done on the shop floor. FLMs are the people who translate these strategies to day-to-day work so staff can get on with the details. This ‘translation’ usually involves the FLMs’ understanding of the strategy in the first place, especially when FLMs are left to fill in many nitty-gritty details. Indeed, my on-going research suggests that FLMs’ understanding of ‘what is strategy’ does influence how they respond to new directions from the head office and how they plan the day-to-day work in their stores.

Right, so organisations should bother about what influence FLMs’ understanding then?

Yes. This is particularly important in recessions. High street retailers want their branch managers to capitalise on their locale yet maintain universal standards and procedures which form an important part of the retailer’s culture and public image. Each of these stores is located in a different place, and FLMs need to be mindful of their local environment. The tactics implemented in a big shopping centre in London with high staff turnover, many close competitors and cash-rich clientele are rightly different to those implemented in a small town centre in a rural area.

Get real! With this line of argument FLMs should be given the reins and they will run wild!

Well, you will be disappointed then to know that they do have some control already! Retail FLMs are the people on the shop floor, they face and talk to the customers, they drive the sales, and they train and organise their staff. For better or worse, all policies, procedures and targets are flavoured with the FLMs’ views of what is important for the future of the business. I strongly believe that we must understand what could influence these views. But maybe the real practical dilemma comes afterwards- if you knew what influences your junior managers’ view of strategy, what would you do? Would you try and alter their view?

P.S. I have always enjoyed reading Tim Harford’s column in the Financial Times, and I have shamelessly copied his style in writing this blog.

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Alex Wright, Lecturer in Strategic Management at The Open University Business School.

Middle managers frequently get the blame when things go wrong. They are often portrayed in both the media and academic worlds as opposing the strategies developed by senior managers; as deliberately creating roadblocks by taking ineffective actions; as ‘foot-dragging’, assigning strategic activity a low priority; and, worse of all, middle managers can sabotage the carefully crafted strategies of senior management teams

I want to argue that far from being the problem, when it comes to strategy, middle managers are often the ones that think and act strategically. In my experience, the old idea that senior managers are the strategic thinkers and middle managers are the implementers needs rethinking. I am going to list four myths associated with middle managers and strategy and then draw from my research to debunk these myths or, at least, cause you to rethink your assumptions.

Strategy or strategy work is a high status activity. It has become taken for granted that senior managers are somehow natural strategists, while middle managers are somehow natural implementers. When a middle manager gains promotion and becomes a senior manager, it is assumed that somehow their natural proclivities change and they are now competent and happy strategists.

My experience in the UK and overseas suggests that this may be the case, but equally likely is the situation where middle managers take the strategic lead in their organisations. Traditional views of strategy saw formulation and implementation as separated activities, yet we have known for some time that strategy is just as likely to emerge as it is to be planned and executed. Emergent strategy, I contend, is most likely to evolve through the acts of middle managers than of senior managers, for it is only middle managers who have the flexibility and willingness to change and adapt needed for emergent strategy to appear.

This myth stems from the idea that the organisation chart represents the relationships in an organisation. It frames the relationships middle managers have as fixed, stable and functional. Middle managers have relationships with their bosses and with their staff; if they have horizontal relationships, these are most likely to be with other middle managers.

Again, this may be so, but in my experience middle managers often work within an action net of complex relationships; some stable, some transient, some clear, some very unclear. I have seen organisations where middle managers are just as likely to speak with customers, suppliers, stakeholders, trade associations and professional networks, as they are with their immediate colleagues. Through these contacts, I suggest, middle managers develop their knowledge that is then exercised when undertaking strategy work.

This myth is perpetuated by both those who write about management consultancy and those who write about strategy. The consultant/client relationship is often depicted as a relationship involving organisations not people. However, when we dig below the surface we find people interrelating, getting on, disagreeing and compromising. Once a contract has been struck, management consultants spend more time with middle managers than they do with senior managers.

I have seen examples where the relationship with the organisation was passed on from senior manager to middle manager to get the work done. Similarly, I have seen the relationship emerge and strengthen with a middle manager before being presented to senior managers. I have also spoken with consultants who tell me that they can only really be honest about the issues they have encountered with middle managers because, in their view, senior managers only want good news (another myth, perhaps). Consultants make a difference on how strategy is understood within the organisations that employ them. They do this, I argue, through their conversations with middle managers rather than senior managers.

This myth relates to Myth No.1, but the difference here is the assumption that middle managers do not want to think or act strategically. Again, this myth sees strategy as conventionally implemented after strategic decisions have been made. It suggests that senior managers identify themselves as strategists, while middle managers’ sense of identity sees them as implementers. Once again, this may be the case for some, but it is not a universal truth.

My research suggests that middle managers can and frequently are capable strategists. Further, I have seen situations when senior managers are not active strategists, when they are too busy doing other things to think and act strategically. When this happens, an organisation can experience a strategic void or absence. It is middle managers, that much maligned breed, that often step into the breach and fill this void, and they do this by drawing on whatever is at hand to fashion effective and relevant strategies. Middle managers are not the problem, more likely they are the solution, and organisational processes should be developed that help rather than hinder them.

Final words

In this blog I have avoided presenting the idea that strategy can be boiled down to decision making, or indeed, that organisations have strategies. This is not my position. For me, strategy can include decision making, but it involves much more and if we only concentrate on decision making we miss the vast majority of actions that can be discerned as strategic. Further, to focus on what strategies organisations have misses the point. Much more productive, I feel, is to focus on what strategists do, how strategy-work is accomplished not what it is.

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Guest blogger:Professor Brian Smith, Visiting Research Fellow at The Open University Business School, Adjunct Professor at SDA Bocconi in Milan.

Emerging practice in pharmaceutical industry offers new ways to improve the annual business plan review process.

The size and reach of pharmaceutical (pharma) companies varies greatly: from vast multinational global conglomerates to small start-up companies; from speciality firms to those spread across almost every therapy area. Despite this variation, our research shows that the annual business review is used almost universally in the industry to formulate and implement competitive strategy.

Despite the time and effort invested in these reviews, only a small minority of the companies we studied actually thought the process was valuable. By studying this minority, three valuable lessons emerge for the industry as a whole.

Lesson 1: The two sides think differently

Executives usually think in terms of sales, profit and return on investment (ROI) and justify their plan in that language. Business owners and CEOs think in terms of risk-adjusted ROI and evaluate a plan in terms of not only what it promises but also the probability of it delivering on that promise. This small but critically important difference in perspective explains the weaknesses of the business plan review process in most pharma companies.

By contrast, those unusual pharma company executives who have overcome this problem share a common way of thinking about business risk as a three-component model summarised in Figure 1.

Figure 1: The components of business risk

Lesson 2: Pay attention to sub-categories of commercial risk

Although technical and political can be important, it is the understanding and assessment of commercial risk that is crucial to pharma companies. To analyse commercial risk more effectively, it should be broken down into three further categories, as shown in Figure 2.

Figure 2: The components of commercial risk

This sub-division of commercial risk is important because it allows executives to a) focus their attention on whatever type of risk is most important to their particular business, and b) to then analyse that critical risk in detail.

We found that leading companies talk of each of the three categories as having multiple sub-components (see Figure 3). Market risk, for example, is a combination of risks associated with estimating total market volumes, market category shares and forecast growth rates. In the innovative markets where market risk is important, all of these estimates have wide margins of error and these are the primary cause of commercial risk. Share risk, by contrast, is important in mature markets and arises from the nature of the competitive strategy, especially how well it addresses market segmentation, targeting and positioning and how well it anticipates market trends. In the commoditising markets where profit risk is the focus of executives’ attention, the key issues are costs, prices and competitive response.

Figure 3: The sub-categories of commercial risk

A lack of attention to any of these factors leads to commercial risk. In total, our research identified 15 sub-categories of commercial risk. Few companies managed all of them but the best companies pay close attention to those that are important to their particular business.

Lesson 3: Carry out Marketing Duo Diligence at two levels

The third lesson is to carry out a practical application of the risk perspective, which we named Marketing Due Diligence[i], to avoid a wasteful, often sub-optimal process. This works at two levels.

At the level of those who evaluate and approve business plans, business owners and their CEOs use these ideas to assess business plans rigorously and methodically. The Marketing Due Diligence process then becomes a kind of diagnostic tool, systematically revealing any areas of the plan in which commercial risk has not been well understood or managed. By focusing according to product category life cycle stage, boards find this approach not only effective but efficient, allowing them to prioritise their time onto parts of the plan where poorly-managed risk is most likely to be found.

At the level of those who prepare and present business plans, executives in various commercial functions use these ideas to guide their planning process, in effect using Marketing Due Diligence as a kind of checklist to ensure what they present to the board is as strong as it possibly can be and, importantly, is expressed in the language of risk-adjusted ROI. Again, product category life cycle stage allows prioritisation of executives’ efforts but each of the three main components of commercial risk can be managed better and mitigated.

Professor Brian D Smith researches strategy in pharmaceutical markets at The Open University Business School and SDA Bocconi, Italy. He welcomes comments and questions both here and at brian.smith@pragmedic.com

Guest blogger:David Mayle, Lecturer in Management and a member of The Open University’s Centre for Human Resource and Change Management.

In the search for some real dialogue, I’m going to offer something deliberately contentious. Towards the top of this article there is currently a grey box with ‘Reply’ in it. If anyone has had the temerity to post a comment (for that is what we’re looking for) the grey box will change to contain a number. Do click on it and let us hear your opinion. So please, disagree, agree, rebut, improve, argue, however the mood takes you.

Have you noticed how the term ‘trade-off’ is considered to be a bit wimp-ish in our sadly macho world of modern management? Some of this stems from the sort of questioning attitude inherent in TQM (Total Quality Management) and its derivatives, wherein we were all (rightly) encouraged to regard trade-offs – ‘if we want A, then we can’t have B’ – as self-limiting beliefs, to be challenged and, hopefully, circumvented. Now this is all right and proper up to a point; trade-offs are indeed not inevitable, with a little imagination, we can often design our way around them. There are, however, two really important words in that sentence: ‘often’ (as opposed to ‘always’), and ‘design’ (as in the design school of strategy).

Let’s take ‘design’ first. Ever since Mintzberg’s attempted demolition of the design school model of strategy[1], design has had a bad press in strategic circles. I’ve never quite decided whether that was a wilful misrepresentation of the whole process of design on Mintzberg’s part, or whether it was just his unfortunate use of the term to describe the painfully deterministic traditional process he was attempting to critique. Either way, the treatment was unhelpful in the extreme. In her elegant rebuttal of Mintzberg’s argument[2], Jeanne Liedtka notes that any respectable design engineer would highlight the contingent, iterative, on-going problem-solving nature of the design process as something actually very similar to Mintzberg’s earlier musings on ‘crafting strategy’[3]. Anyway, the bottom line with regard to ‘design’ in this context is that it is an on-going process that consumes resources – time usually included – in pursuit of a solution. The potential need for trade-offs must be evaluated on a case-by-case basis; it cannot simply be dismissed by management fiat.

So let us move on to ‘often’. Often means ‘not always’, or even just ‘sufficiently frequent that we should not automatically assume otherwise’. So let’s not assume, let’s check it out. But then, after careful consideration maybe we have to recognise that we can’t get round it this time, maybe we really have to choose between two products or two markets, maybe we really haven’t got – or can’t get hold of – the resources required to do justice to both. Trouble is, how do you acknowledge this in a culture where a ‘Can Do’ mentality is a requirement for continued employment?

Over many years and many organisations, this has always been my biggest strategic problem: how to manage my boss’s gut feel. How do I convince the management of the day that (a) Strategy is to do with decisions, as much about what we’re not going to do as what we are; (b) Priorities must be established, and we need to accept that stuff lower down the list will in all probability not happen, and (c) the Jean-Luc Picard School of Management[4] only works on television.